General Motors: Poster Child for Products Liability

[Full disclosure: I drive no General Motors vehicles. My first and only GM vehicle was a 2005 Corvette, proudly purchased brand new and driven for 18 months until the brake lines totally failed with 13,000 miles on the vehicle, while I was driving on a crowded Washington Beltway. Fortunately I was able to pull over and stop the car using my parking brake. My ‘Vette then sat in the shop for two weeks waiting for GM to stop the assembly line in Bowling Green, KY, collect a brake line (dealers don’t stock them) and ship it to my dealer, which in the meantime had been pestering me to return the Tahoe it had given me as a loaner and exchange it for a Chevy Cobalt. I held onto my Tahoe, and I’m mighty glad I did. Since then, I’ve never once been tempted by a car from the General.]

In the appendix to my Products Liability hornbook, I show how competitive considerations will lead manufacturers to implement many efficient quality control measures even in the absence of liability to injured users. But these competitive considerations only work if they are known, that is, if they are not fraudulently concealed.

I’m sorry to say that the recent ignition switch travesty, which affects both the “old” (pre-bankruptcy) and the “new” (post-bankruptcy) General Motors, is making me abandon my academic detachment and root wholeheartedly for the plaintiffs’ bar.

It now appears that at least seventeen Americans have been killed (GM acknowledges “only” thirteen deaths), and many more injured, because their cars “went dead” while driving due to a defective ignition switch that General Motors: a) knew about; b) could have replaced for $0.57 each but declined to do; and c) declined to adequately inform government regulators about.

English: 2005 Chevrolet Cobalt LS (Photo credit: Wikipedia)

I’ve refrained from writing much about this until the dust settled, which it has largely done. I’m now frankly enraged. Here’s a summary of factoids that will doubtless be fleshed out in the many current and even more numerous future lawsuits against General Motors:

[Thanks are due here to excellent NPR reporting by Sonari Glinton.] Here’s Scott Oldham of Edmunds.com, a web site frequently consulted by gearheads like me: "’At the time, in the context of what GM was making before the Cobalt, it was seen, for the most part, as a giant leap forward.”’ Oldham remembers test-driving the Cobalt at an event for journalists and industry analysts when the car was being launched a decade ago. He drove on the track with an engineer in the passenger seat. ‘"And I remember coming up to a curve, and I moved my foot, and as I moved my foot, my knee kind of pinned this key fob between my knee and the steering column. And when I hit the brake, my leg moved down. And it basically pulled the key down and shut the car off."’ The systems that were connected to the engine just stopped working. ‘"There was this moment of panic where I said, 'Oh my God, the steering isn't working. I got the car slowed down and pulled to the side. Catastrophe was avoided."’ About 10 miles later, it happened again. Oldham and the engineer stopped at the side of the road to try to figure out what had happened. Finally, he recalls, they realized what was going on. ‘"I would start the car and then just with my hand, just pull down on that key fob just ever so slightly. And sure enough, I could turn the car off. And we looked and each other, and I go, 'That seems like a little bit of problem.'" That was in 2004….” GM was duly informed, by Oldham and by many others. But it did not act, other than by alerting its dealers to tell aggrieved customers to remove excess weight from their key fobs.

One year later, high-schooler 16-year old Amber Marie Rose was headed home from a party when she lost control of her brand new 2005 Chevy Cobalt [similar car pictured] in Dentsville, Maryland (my home state). Amber’s car left the road and struck a tree, killing her. Tragically, both alcohol and speeding may have been factors in the crash, The Washington Post reported. However, it was subsequently revealed that Amber’s airbags never deployed. EMT technicians declared that had they gone off, Amber might have been injured but would not have been killed. Why did the air bags not deploy? Amber’s biological mom declared that, "[w]e were told that the ignition switch was actually in the accessory position, which in effect turned the airbags off.” She found this out only by hiring a private investigator. What happened to Scott Oldham likely happened to Amber Marie Rose. In my opinion General Motors’ silence led directly to Amber’s death, and may well have caused the fatal crash itself.

The National Highway Traffic Safety Administration (NHTSA) has known of the problem since Amber’s death, but failed miserably to investigate. “After two of the Cobalt crashes, the regulators took a close look at the cause, each time raising the possibility of a defect. They also met with GM about the issue. But despite the red flags, they never opened a broader investigation into whether the car was defective,” the New York Times’ Christopher Jensen wrote. Jensen has detailed the cozy “revolving door” that leads NHTSA attorneys into “Biglaw” jobs with auto or auto parts manufacturers. Ultimately, up to 2.6 million vehicles are potentially affected by these ignition switches. In addition to the Chevy Cobalt, many Pontiac G5’s, Saturn Skys, Saturn Ions and Pontiac Solstices received the defective switch.

In General Motors’ 2009 bankruptcy, liability for then-existing lawsuits was passed on to the “new” GM. A few accidents post-date the bankruptcy, and the “new” GM is likely on the hook there: Automotive News claims to know of at least one fatal crash of a Cobalt in December 2009 that was caused by an airbag not deploying. But liability for older accidents in these 2003-2007 vehicles has been discharged under bankruptcy law: victims must rely on the insufficient assets remaining in the coffers of the “old GM” unless the bankruptcy discharge was obtained through fraud. That is the current nexus of litigation: the General, conveniently represented by new CEO Mary Barra, vehemently denies that anyone in high management knew of the ticking time bomb. U.S. Bankruptcy Judge Robert Gerber will have to determine this question, unless GM settles these new suits, which might total more than $10 Billion (that’s Billion with a B). And if GM does settle, you can be sure its new shareholders will sue the corporation for breach of fiduciary duty and for damages caused to their stock price by the fraud. Don’t forget eventual fraud suits against its (until recently) controlling shareholder, Uncle Sam, which has now sold the GM shares it acquired in its takeover of the bankrupt company. Someone will surely claim that government agents had information about the ignition switch debacle and pawned it off on unsuspecting share purchasers.

GM has just paid the maximum NHTSA fine ($35 million) for failing to report this problem to the agency in reasonable time. The real government hammer (on top of potential products liability if the bankruptcy issue is resolved) is not NHTSA but criminal prosecution by the Department of Justice, which recently settled with Toyota for over $1Billion in a case where there was no real defect and less than half as great a NHTSA fine. DOJ may extract several Billions from the General.

GM’s actions have been mostly pathetic. The company hired the Jenner & Block law firm to investigate the mess, but that firm has had multiple contacts with GM and may have a serious conflict of interest. More recently the board has hired its own legal counsel, Wachtell, Lipton, Rosen & Katz, ostensibly to find out why the board itself was not informed sooner of the scandal. Perhaps the firm will also be advising Board members on their own potential legal exposure.

Meanwhile, on May 15 GM announced up to 3 million new recalls for myriad other defects in its vehicles, including 520 for GM's brand new pickups and SUVs for potential steering failure. GM sent those owners overnight-delivery letters telling them to have their trucks towed — not driven but towed — to dealers for inspection and repair. A CNBC report aired this week reveals that as of May 15 GM had issued 24 safety and non-compliance recalls for roughly 12.8 million vehicles worldwide, including nearly 11.2 million in the U.S. The recalled amount is roughly 4.2 million vehicles more than the automaker has recalled in the past five years combined.

General Motors has been an embarrassment to those few of us, in legal academe, who claim that auto manufacturers are very often unjustly sued for products liability. I’m glad I don’t own any of their vehicles, and I’m especially glad that I resisted my dealer’s efforts, back in the day, to recuperate my Tahoe loaner and replace it with the cheaper Cobalt. I look forward to the day when all those who knew of this fatal defect in GM vehicles (including notably the company's attorneys, if they were aware of a dangerous defect and failed to exhort GM to reveal it) are held to account.

I add in closing that this gearhead is very happy with his BMW R1200RT motorcycle, his Mazda Miata, and his wife’s new, Lafayette-Indiana-built-with-pride Subaru Outback.